Food prices low but poor still go hungry

Global food prices are at their lowest level in years, but thanks to the exceptionally strong US dollar poor people in developing countries suffering severe climate shocks are seeing no benefit.

The FAO Food Price Index for 2015 was 19 points down on 2014, marking the fourth consecutive annual decline across a basket of commodities.

“Abundant supplies in the face of a timid world demand and an appreciating US dollar are the main reasons for the general weakness that has dominated food prices in 2015,” said the index, released recently.

The food price shocks of 2007 and 2011, which squeezed family budgets and drove the poor deeper into poverty, are over. The major producers responded to the high prices by boosting output, leading to the current surpluses.

But several developing countries currently need to import as a result of poor agricultural seasons, and “what you pay for in food imports is a function of the strength of your currency against the dollar and its purchasing power,” noted FAO senior economist, Abdolreza Abbassian.

The US Dollar Index, which measures the dollar against major currencies, was up by around 10 percent at the end of 2015. “So far this year the dollar has gained against currencies of all description — developed market, emerging market, commodity currencies,” the Financial Times wrote.

For southern Africa – and especially South Africa – the situation is particularly grim.

South Africa is the maize basket for the region, but last year an El Niño-induced drought dropped output by 30 percent. It’s feared that more late rains again at the end of 2015 could see production fall by as much as 50 percent, at a time when the rand is trading at record lows against the dollar.

“It’s a very alarming situation in southern Africa,” said Abbassia.

Across the region maize reserves are dangerously low, and 30 million people are regarded as “food insecure” – meaning they lack access to enough food to lead healthy lives. While South Africa as an economic leader can manage the crisis, other more vulnerable countries will need food aid to get by.

The poor regional harvest and the dry conditions at the start of the 2016 crop season mean local food prices have continued to climb – doubling in some cases, according to FAO’s latest monthly Food Price Monitoring and Analysis bulletin.

The fact that there are global food surpluses and yet people are still going hungry means the problem “is about access to food” rather than availability, said Abbassian. The world’s ability to grow more food is not the solution to hunger, but its affordability in local markets.